Orion CEO, John Scribante, commented, "Despite overall revenue growth of
12% and a 27% increase in LED product sales in the first nine months of
fiscal 2017, both Orion and the lighting industry hit an ‘air pocket’ of
lower than anticipated order activity in Orion’s fourth quarter ended
March 31st. This slowdown limited our FY 2017 revenue growth
to 3.5%-4%, or approximately $70.0-$70.4 million, compared to revenue of
$67.6 million in fiscal 2016, and our previously communicated guidance
of 10-15% growth.”

Orion’s Q4’17 preliminary, unaudited revenue declined 17-19% to
approximately $15.1-$15.5 million, compared to $18.6 million in Q4 ’16.
The Q4 ‘17 revenue shortfall was principally the result of the far
slower pace of lighting sales early during the period. Orion’s FY 2017
performance reflected approximately 17% growth in energy-saving LED
lighting product sales. LED sales rose to approximately 81% of total
lighting product sales in FY 2017, up from 71% in FY 2016 and increased
to approximately 89% of total lighting product sales in Q4’17, up from
76% in Q4’16.

Orion is not seeing any structural alterations or changes in the
competitive landscape within the industrial LED lighting retrofit
market. In fact, during fiscal 2017, Orion grew its new order bookings
by approximately 15% year over year. Orion’s fiscal 2017 revenue grew
despite the expected ongoing decline in its legacy fluorescent business,
which contracted by approximately $6 million; as well as a
year-over-year decline in LED component pricing, which negatively
impacted average selling prices and Orion’s FY 2017 revenue. Looking
past these factors, the solid underlying growth in LED product sales
underscores strong confidence in Orion’s market position and growth
prospects.

As others in the LED retrofit industry also experienced, new order
activity decelerated early in Orion’s fourth quarter, as many customers
reevaluated capital spending plans while they assessed the economic,
business, and market sentiment impact of the new U.S. Government
administration and its policies. Orion started to see budgets begin to
be released later in its fourth quarter, but the pace of rebound proved
more measured than expected, leading to the Q4 ‘17 revenue shortfall.
Fortunately, the market is moving towards a more normal pace of
business, and Orion continues to see its energy-efficiency value
proposition resonating with customers, as confirmed by last week’s
announcement of $1.9M in new orders with the U.S. Navy.

Preliminary Addition to Inventory Reserves

Given the heightened deceleration in fluorescent lighting and prior
generation LED product sales as a result of more energy efficient and
price-competitive LED alternatives, Orion plans to record a reserve
against its slower moving inventory of $1.5 – $2.0 million in Q4 ‘17.
This additional reserve will be reflected as a charge within cost of
sales, reducing gross margin. In the future, Orion will follow a
“build-to-order” model for its fluorescent products business, helping to
insulate the Company from future fluorescent inventory issues.

As a result of the addition to inventory reserves and lower than
anticipated production activity during the quarter, the gross margin
estimate for FY 2017 is expected to be approximately 25% versus previous
guidance of at or near 30%.

Preliminary Balance Sheet

On a preliminary, unaudited basis, Orion ended FY 2017 with
approximately $17.3 million in cash and cash equivalents, compared to
$15.5 million at March 31, 2016. Long-term obligations under Orion’s
revolving credit facility were approximately $6.6 million at March 31,
2017 as compared to $3.7 million at March 31, 2016.

Concluding Remarks

Mr. Scribante added, “Our LED product revenue has grown at a 130%
compound annual growth rate to $53.3 million over four years. That
speaks to the strength of our product mix and the clear ROI benefits of
retrofitting to high quality, energy efficient, and flexible Orion LED
solutions. Further, this growth was achieved amidst a restructuring of
our agent network over the past year. We believe the outlook for the LED
lighting retrofit industry and Orion remains strong, and we are
committed to delivering results.”

About Orion Energy Systems

Orion is a leading designer and producer of energy efficient lighting
and retrofit lighting solutions for commercial and industrial buildings.
Orion manufactures and markets connected lighting systems encompassing
LED solid-state lighting and intelligent controls. Orion systems
incorporate patented design elements that deliver significant energy,
efficiency, optical and thermal performance that drive financial,
environmental, and work-space benefits for a wide variety of customers,
including nearly 40% of the Fortune 500.

Safe Harbor Statement

Certain matters discussed in this press release, are "forward-looking
statements" intended to qualify for the safe harbor from liability
established by the Private Securities Litigation Reform Act of 1995.
These forward-looking statements may generally be identified as such
because the context of such statements will include words such as
"anticipate," "believe," "could," "estimate," "expect," "intend," "may,"
"plan," "potential," "predict," "project," "should," "will," "would" or
words of similar import. Similarly, statements that describe the
Company's future plans, objectives or goals are also forward-looking
statements. Such forward-looking statements are subject to certain risks
and uncertainties that could cause results to differ materially from
those expected, including, but not limited to, the following: (i) our
ability to achieve our expected revenue, gross margin, net income and
EBITDA objectives in fiscal 2017 and beyond; (ii) our ability to achieve
and sustain profitability and positive cash flows; (iii) the
availability of additional debt financing and/or equity capital, and our
limited borrowing capacity under our bank line of credit; (iv) our
development of, and participation in, new product and technology
offerings or applications, including customer acceptance of our new
light emitting diode product lines; (v) deterioration of market
conditions, including our dependence on customers' capital budgets for
sales of products and services and continuing decreases in prices of LED
products; (vi) our ability to compete and execute our strategy in a
highly competitive and rapidly changing LED market and our ability to
respond successfully to market competition; (vii) our ability to
successfully implement our strategy of focusing on lighting solutions
using new LED technologies in lieu of traditional HIF lighting upon
which our business has historically relied; (viii) adverse developments
with respect to litigation and other legal matters to which we are
subject; (ix) our failure to comply with the covenants in our revolving
credit agreement; (x) increasing duration of customer sales cycles; (xi)
fluctuating quarterly results of operations as we focus on new LED
technologies; (xii) the market acceptance of our products and services;
(xiii) our ability to recruit and hire sales talent to increase our
in-market sales and our ability to pursue an expanded third-party sales
channel through distribution and sales agents; (xiv) price fluctuations,
shortages or interruptions of component supplies and raw materials used
to manufacture our products; (xv) loss of one or more key customers or
suppliers, including key contacts at such customers; (xvi) our ability
to effectively manage our product inventory to provide our products to
customers on a timely basis; (xvii) a reduction in the price of
electricity; (xviii) the cost to comply with, and the effects of, any
current and future government regulations, laws and policies; (xix)
increased competition from government subsidies and utility incentive
programs; (xx) potential warranty claims; and (xxi) the other risks
described in our filings with the SEC. Shareholders, potential investors
and other readers are urged to consider these factors carefully in
evaluating the forward-looking statements and are cautioned not to place
undue reliance on such forward-looking statements. The forward-looking
statements made herein are made only as of the date of this press
release and the Company undertakes no obligation to publicly update any
forward-looking statements, whether as a result of new information,
future events or otherwise. More detailed information about factors that
may affect our performance may be found in our filings with the
Securities and Exchange Commission, which are available at http://www.sec.gov or
at http://www.orionlighting.com in
the Investor Relations section of the Company's Web site.